Earnings Call Transcript - RITM Q4 2025

Operator, Operator

Good morning, and welcome to the Rithm Capital Fourth Quarter 2025 Conference Call. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Emma Holke, Deputy General Counsel. Ma'am, please go ahead.

Emma Holke, Deputy General Counsel

Thank you, and good morning, everyone. I would like to thank you for joining us today for Rithm Capital's Fourth Quarter and Full Year 2025 Earnings Call. Joining me today are Michael Nierenberg, Chairman, CEO and President of Rithm Capital; Nick Santoro, Chief Financial Officer of Rithm Capital; and Baron Silverstein, President of NewRez. Throughout the call, we are going to reference the earnings supplement that was posted this morning to the Rithm Capital website. If you've not already done so, I'd encourage you to download the presentation now. I would like to point out that certain statements made today will be forward-looking statements. These statements, by their nature, are uncertain and may differ materially from actual results. I encourage you to review the disclaimers in our press release and earnings supplement regarding forward-looking statements and to review the risk factors contained in our annual and quarterly reports filed with the SEC. In addition, we will be discussing some non-GAAP financial measures during today's call. Reconciliations of these measures to the most directly comparable GAAP measures can be found in our earnings supplement. With that, I will turn the call over to Michael.

Michael Nierenberg, CEO

Thanks, Emma. Good morning, everyone, and thank you for joining our fourth quarter earnings call. We have a lot to be enthusiastic about as a company. Before diving into the discussion, I want to express my gratitude to our partners for their support, as well as to our employees across all our companies for their dedication and hard work in delivering excellent results for our LPs and shareholders. On today's call, I am pleased to welcome Peter Brindley, one of our new partners, who will discuss Paramount, one of our recent acquisitions in real estate, and Baron Silverstein, whom you know from previous calls, who will provide updates on NewRez. Reflecting on 2025, it was a remarkable year for us, marked by our commitment to serving our clients and generating significant returns for our LPs, alongside increased earnings for our shareholders year-over-year. We expanded our asset management business both organically and through acquisitions, including the addition of Crestline Asset Management and acquiring Paramount, enhancing our portfolio. We now manage over $100 billion in investable assets across the firm. As I've emphasized before, we will grow our firm carefully while focusing on generating results for our clients. Although everyone in asset management seeks growth in assets, we intend to earn that growth through our performance. Financially, our company had a fantastic year, and particularly an excellent fourth quarter, which I will detail in our supplement. The diversification of our platform has paid off, leading to a record fourth quarter from an EAD perspective. Our book value increased year-over-year, even after distributing over $600 million in dividends. Our Genesis business, which specializes in multifamily loans and residential transitional loans, had a record year in both originations and earnings, generating nearly $5 billion in loans and seeing earnings surge by 250% since we acquired the company in 2022. At the time of acquisition in 2022, production was $1.7 billion, and this year we're projected to exceed $5 billion while maintaining prudent credit discipline. NewRez, our mortgage company, also had a successful year, with year-over-year earnings rising by 13%. We have continued to invest heavily in our technology stack and marketing divisions to enhance our customer experience and branding. Over the past year, we brought on two new leaders in these divisions: Brian Woodring from Rocket and Leslie Gillon from JPMorgan, both of whom are experienced in their fields. We announced two significant tech transactions: Valon, a class-leading servicing system that Baron will discuss, and HomeVision in the origination space. Our Asset Management division had an impressive year as well. As I've mentioned, we completed the acquisition of Crestline, which combines a robust credit shop with both insurance and reinsurance operations. Sculptor had a strong year on the performance and capital formation sides, particularly in real estate, which culminated in a $4.6 billion new fund. We launched our first evergreen fund on a bank platform in the ABF sector and created separate managed accounts for our origination business with international clients. We've recently initiated a closed-end ABF fund with an initial $200 million seed from the pension. While we are very pleased with our achievements, there remains much work ahead of us. Regarding the Paramount acquisition, it was an opportunistic move. We acquired 13 large office buildings in New York and San Francisco, of which about 10 are core, which we consider a significant highlight. We are enthusiastic about the acquisition price and the operational capability we now possess, which will better position us for further opportunistic investments in real estate. Moving forward, we plan to expand our platform to offer more products for our LPs and shareholders. I will now reference the supplement available online, starting on Page 3. As shown, we manage over $100 billion in assets, comprising both balance sheet and third-party clients. The Rithm Asset Management AUM is at $63 billion, with our balance sheet at $53 billion. Within our company family, Sculptor stands out as a leading asset management firm specializing in credit, real estate, and multi-strategy investments. Crestline offers an extensive range of credit solutions. Paramount, which Peter will discuss soon, will soon undergo rebranding to avoid confusion with movie studios. NewRez ranks as the third-largest mortgage servicer and the fifth-largest mortgage lender in the U.S. Genesis is also a major player in residential transitional lending, making it a sought-after product in fund formation for our clients. As previously discussed, we will grow based on performance, which has been the foundation of our company’s success and will guide our ongoing discipline. On Page 4, our financial highlights for earnings in 2025 show earnings available for distribution at $2.35 per diluted share, reflecting a 12% year-over-year increase. Our Q4 was exceptional, showcasing the strength of our diversified platform with earnings of $0.74 per diluted share. We have maintained stable earnings performance over 25 consecutive quarters, during which our earnings available for distribution have consistently exceeded the common dividends paid. Since our company’s inception in 2013 under Fortress, we have distributed over $6 billion in dividends. For Q4, GAAP net income was $53 million, or $0.09 per diluted share, with a 3% return on equity. For Q4, earnings available for distribution were $419 million, at $0.74 per diluted share, yielding a 24% return on equity. For the full year, GAAP net income was $567 million. The difference between Q4 and the total for 2025 is due to the MSR mark we recorded for conservatism, which Darren will elaborate on shortly. For fiscal 2025, GAAP earnings were $1.04, with a return on equity from GAAP figures at 8%. For the full year, earnings available for distribution, taking out anomalies, totaled just under $1.3 billion, or $2.35 per diluted share, with an overall return on equity of 19%. The reported book value at the end of December 31 was $7 billion, equating to $12.66 per common share, an increase from the prior year. Market indicators show the 10-year treasury at about 4.30%, while mortgage rates have slightly declined. Our current book value may range between $12.75 and $13. Our common stock dividend yields approximately 9.2%, based on last year’s figures. We distribute $0.25 quarterly, totaling $1 per share annually. Our ending cash and liquidity for the year, after accounting for the Paramount acquisition, stood at $1.7 billion on our balance sheet. On Page 5, our year-end review of asset management reflects a strong performance, with Sculptor recording gross inflows of $5.8 billion in 2025 and AUM increasing from $34 billion to $38 billion. Regarding Rithm, we have closed several ABF products, including our first evergreen fund and are actively marketing a closed-end ABF fund seeded with $200 million. The Crestline acquisition enhances our credit capabilities, aligning with our vision, as they manage nearly $20 billion in AUM and have diverse LPs. After their recent annual meeting in Texas, clients expressed excitement about the partnership and the new opportunities developed through Crestline. I'm eager to hear from Peter about Paramount, with its Class A office buildings in New York and San Francisco, which is a promising acquisition for us. At Rithm, we have strategically avoided, rather than focused on, commercial real estate, but this acquisition now positions us as the fourth-largest owner of office space in New York City, an exciting milestone. In the portfolio overview on the left side of the page, Genesis Capital registered record earnings with $4.8 billion in originations for 2025, continuing to grow its client base while focusing on credit-first strategies in our origination businesses. NewRez remains the third-largest mortgage servicer in the U.S., including large banks, and is the fifth-largest lender, with a servicing portfolio of $850 billion, funded volume for 2025 amounting to $63 billion, and year-over-year pre-tax income surpassing $1 billion, up 13%. We've also solidified strategic partnerships, including equity investments in technology. Our investment portfolio completed eight securitizations totaling $4 billion in UPB, while we enhanced our residential mortgage assets with a $9 billion investment, primarily through our origination businesses in non-QM lending and the Genesis transition loan sector. We have engaged in a flow agreement with Upgrade for home improvement loans, securing just under $600 million in 2025. Macro factors indicate geopolitical risks prevalent across the system, with the administration focused on affordability, announcing plans for the GSEs to acquire up to $200 billion in Agency MBS, though specifics are unclear. For 2026, we anticipate potential purchases upwards of $155 billion, some of which may have already occurred. Recently, we noted a tightening mortgage basis, suggesting reduced mortgage rates relative to treasury yields, which could lead to increased mortgage production and higher amortization levels, presenting opportunities for us to enhance origination gains. Looking ahead, we expect the yield curve to steepen, a trend I have discussed in previous calls. We are currently positioned along the front end and hold minimal short positions, mainly at the back end, expecting this trend to continue. The announcement of Kevin Warsh as the new Fed chair may further contribute to this yield curve steepening. Lastly, it's noteworthy that Agency MBS has performed exceptionally well towards the year's end, alongside our investments in returning to office spaces, which Peter will address. On Page 8, we anticipate continued growth in our asset management business. We do not have immediate needs; instead, we aim to develop in specific areas where we currently lack expertise, such as infrastructure. It’s essential that we maintain skilled teams where we seek expansion. Overall, in asset management, we employ about 700 individuals across our platform, including investment and support professionals, positioning us well for ongoing growth while prioritizing performance. Page 9 reflects Sculptor's strong performance, with gross inflows of $5.8 billion and solid returns across various funds. The multi-strategy fund now stands at nearly $9 billion, showing gross returns of 15.5% and net returns of 11% for 2025. The credit fund has delivered impressive gross returns of 18.9% and net returns of 14.5%. Asset management revenues have risen by $95 million since 2024. We believe we possess robust resources in credit and real estate, and we will only pursue growth in new areas with the potential for market leadership. Sculptor has a rich history, with over 70% of clients staying with us for more than a decade, driving AUM close to $40 billion. The Crestline acquisition closed in December, encompassing $18 billion in total AUM and 700 investors across strategies. The business has established a strong presence over 20 years, and Keith Williams has effectively led our asset management initiatives while expanding offices in key cities. For 2025, the Capital Solutions business has generated robust net IRR, and our brand remains strong. Our recent acquisitions have filled notable gaps in our offerings, achieving over $40 billion in combined credit operations across Sculptor and Crestline. Page 12 discusses our approach to the Paramount deal. When we initiated Rithm, formerly New Residential, in 2013, we aimed to capitalize on a dislocated asset class focused on mortgage servicing rights. We initially seeded the company with $1 billion and purchased substantial mortgage servicing rights from banks. Regarding Paramount, with its potential rebranding, we believe now is an opportune moment to invest in a dislocated office market, leveraging our clean balance sheet and absence of legacy office assets to exploit opportunities. We entered the market against some of the largest office REITs and foreign investors, acquiring buildings at a 7% cap rate and $585 per square foot—significantly below pre-COVID values, making this an advantageous deal. The buildings’ replacement costs indicate a massive discount at approximately 75%, emphasizing the value of this acquisition. A common inquiry during our capital-raising efforts concerns Paramount's leadership, comprised of 300 professionals within the organization. I am confident in our in-house expertise at Rithm, combined with the capabilities of Paramount’s leadership, ensuring effective operations. We are refining leadership as needed and are excited about the future prospects for this company in commercial real estate and beyond. This acquisition is poised to be transformational for us in the sector. With that, I will hand it over to Peter, who will continue on Page 13.

Peter Brindley, Partner & Executive Leading Leasing Divisions at Paramount

Thank you, Michael. I'll start by saying Paramount owns, manages and operates high-quality, centrally located Class A office properties in New York and San Francisco. The portfolio consists of ten core assets totaling 9.9 million square feet, three noncore assets totaling 2.4 million square feet, and three managed assets in New York totaling 600,000 square feet. The entire portfolio is approximately 13 million square feet. In 2025, we leased more than 1.7 million square feet in our core assets, up 235% from 2024 and our highest annual total on record. Approximately 62% of our 2025 leasing velocity was on vacant space and space scheduled to expire in 2025. The balance of our 2025 leasing served to derisk future lease roll. At year-end, our core portfolio leased occupancy at share was 86.9%, up 220 basis points year-over-year. Our core portfolio boasts a weighted average lease term of 8.4 years for office leases with an average in-place rent of $90 per square foot. Our tenant roster is comprised of best-in-class companies with significant industry diversification. The portfolio is largely comprised of financial services, legal, insurance, technology and media companies. Turning to our leasing results on Page 14. In New York, at year-end, our New York core portfolio's leased occupancy was 92.8% at share, up 780 basis points year-over-year. During 2025, we completed 43 deals totaling 1.3 million square feet with an average lease term of 13.8 years. Our 2025 leasing includes five deals greater than 100,000 square feet, a testament to the quality of our assets and the strength of our team, as Michael alluded to previously. With regard to the New York market, it just continues to gain strength. Manhattan has experienced the strongest return to office momentum in the country with visits to Manhattan office buildings nearing pre-pandemic levels. In-person work, coupled with strong earnings forecasted for U.S. companies in 2026, will power velocity going forward in New York. Return to work is no longer really a conversation. Work from home is in the rearview mirror in New York. This city has more energy than I think it's ever had, and it feels really good. In 2025, Midtown, predominantly where most of our assets are located, posted the highest annual total of new leasing activity since 2018. Robust leasing, little to no new development over the next few years, conversions of select buildings away from office, and the ongoing reduction of available space will further improve Midtown's fundamentals going forward, and we expect will result in NER growth. Turning to our San Francisco leasing results. At year-end, our San Francisco core portfolio's leased occupancy was 62.2% at share, down year-over-year, driven largely by a couple of large known move-outs at One Market Plaza and One Front Street. We're in the process of adding market-leading amenities at each of these premier buildings and look forward to updating you on our progress in subsequent quarters. During 2025, leasing activity in our San Francisco portfolio increased by 330% year-over-year as we completed 16 deals totaling 411,000 square feet with an average lease term of 8.6 years. This represents our highest annual leasing total in five years and reflects the ongoing recovery in San Francisco. More broadly, in 2025, San Francisco recorded approximately 9 million square feet of leasing activity, the strongest annual leasing total since 2019. This uptick in leasing activity contributed to the 310 basis point year-over-year decline in San Francisco's availability rate as tenants are increasingly re-engaged in the market and in many cases, expanding their footprint. At year-end, there were approximately 8 million square feet of tenants in the market, a pipeline that exceeds pre-pandemic levels and once again, a reflection of improving market conditions in San Francisco. In 2025, San Francisco-based companies raised $134 billion of venture capital funding directed in large part to AI companies, which accounted for 143 deals totaling approximately 2 million square feet, more than 20% of San Francisco's annual leasing total in 2025. Approximately 56% of this AI demand, based on deal count, originated from tenants that are new to the market, further reinforcing San Francisco's growing importance as an AI hub. AI companies acknowledge the importance of the office and are becoming an increasingly large percentage of the demand profile in San Francisco. Bottom line is we remain focused on maintaining our great tenant and broker relationships, delivering market-leading hospitality, securing renewals, filling our vacant spaces and infusing best-in-class amenities in our Class A assets to enhance our market-leading offering.

Michael Nierenberg, CEO

Thank you, Peter. Regarding San Francisco, while the slide indicates it is 62% leased, I want to highlight that we've received numerous inquiries from investors looking to capitalize on the recovery in that market. At Rithm, we made an early investment in Columbia Property Trust on the debt side, giving us valuable insights into San Francisco's growth since 2023. I believe there is significant potential for profitability there. Peter mentioned AI, and companies like Anthropic are expanding into new buildings, demonstrating the demand. Additionally, in our office portfolio, we recognize that employees desire a lifestyle aspect in their work environment. For instance, JPMorgan's impressive building at 270 is a great example, and we are incorporating similar amenity packages across our properties. This investment excites us, and we believe it will benefit our shareholders and LPs. On the Genesis side, which we acquired from Goldman Sachs Merchant Bank in 2022, Clint Arrowsmith has successfully grown the business, focusing on origination and credit quality. We've observed trends in delinquencies and have seen issues faced by others in pursuit of rapid growth without ensuring solid credit. The Genesis business, as shown in Slide 16, is thriving and is among the most sought-after products in the market. We plan to expand both multifamily and RTL origination as we progress. Now, I’ll hand it over to Baron to discuss NewRez and we’ll continue on Page 19.

Baron Silverstein, President of NewRez

All right. Thank you, Michael. Good morning to everybody. NewRez had a great 2025, and we're really excited about where we're headed in '26. We finished the year with a total pretax income, excluding mark-to-market of approximately $1.1 billion, which is a 17% increase year-over-year and a milestone for our platform. Our fourth quarter pretax income, excluding mark-to-market, was $249 million, driven by our origination strategy and our disciplined origination strategy, our third-party servicing business and despite the impact of faster prepayment speeds, we delivered a 17% ROE on the quarter and a 20% ROE for all of 2025. For context on speeds, the composition of our servicing portfolio is deliberate and reflects a balance between third-party servicing and owned MSR. Approximately 30% of our overall portfolio is third-party high-margin fee-based servicing. 18% of the overall portfolio, or 26% of the owned portfolio, are Ginnie MSRs, of which approximately one-third were originated in the last three years. Regarding our quarterly MSR mark-to-market, while our high-quality owned MSR portfolio continues to perform well, we saw seasonal increases in delinquencies and advances. The new FHA modification rule has increased immediate delinquencies to encourage long-term stability. Our mark-to-market approach has remained consistent with prior quarters and in our view, conservative. Overall, these results continue to show the power of our platform and our ability to drive consistent earnings. Turning to Slide 20 regarding our 2026 technology strategy. Yesterday, we announced our partnership with Valon Technologies on our servicing operating system. And two weeks ago, we announced our partnership with HomeVision for our underwriting decision engine. These partnerships are designed to upgrade our core operating platforms with AI as a fundamental core component rather than adding AI as an afterthought to existing structures. The first phase of our HomeVision rollout has already doubled our underwriting capacity with further functionality to be delivered throughout 2026. Our partnership with Valon began in 2019 with Rithm as one of their first investors and NewRez as their first subservicing client. Michael saw the potential power of connecting NewRez with Valon to create game-changing servicing technology that will transform mortgage servicing. We expect the Valon operating system to materially improve our efficiency, benefiting all of our 4 million homeowners and our third-party clients. Both of these software partnerships include significant long-term minority equity ownerships that will continue to provide future earnings growth. Turning to Slides 20 and 21, I would like to highlight our originations and servicing business. For the quarter, we funded $18.8 billion, which is a 15% increase from the previous quarter, totaling $63 billion for the entire year of '25 and positioning us as the fifth-largest mortgage lender. Our origination platform generated a pretax income of $126 million for the fourth quarter, excluding mark-to-market adjustments, and around $360 million for the full year, reflecting increases of 31% year-over-year and 57% quarter-over-quarter. Despite ongoing market competition affecting gain on sale margins, we maintained our pricing discipline, avoided chasing market share, and improved our margins compared to the previous quarter. Non-agency production is a key focus for us, with year-over-year growth of 147%, including a remarkable 200% increase in non-QM originations. We have also recently launched our new crypto enhancement, making NewRez the first major lender to accept cryptocurrency assets for mortgage qualification, which is particularly relevant since 20% of U.S. adults currently own crypto. On the servicing front, our third-party servicing portfolio has grown to $256 billion, which includes $25 billion in new third-party servicing that offsets the shift of a low-margin agency subservicing portfolio. We will start onboarding the Wells and Onity non-agency MSR portfolios in March, and the transition to the Valon operating system will begin in 2027. I believe our business is positioned better than ever, and I look forward to sharing the next chapter of NewRez's growth story. Now, back to you, Mike.

Michael Nierenberg, CEO

Thanks, Baron. I have a few comments regarding our mortgage operations. There's been some disruption affecting our equity and other mortgage companies recently. We are not in a hurry to increase origination or assets under management unless it's profitable for us. If others are aggressively pricing origination in the market, we won’t engage in that. Thus, origination volumes will fluctuate. Regarding our mortgage servicing rights, we are fully hedged. While we utilize a steepener, we expect some volatility in our market valuations when interest rates fluctuate or mortgage spreads narrow. That's just part of the business. Additionally, thinking about our technology initiatives, like our involvement with Valon, we first connected with them years ago and invested in a servicing portfolio. We also took an equity stake in the company. If everything unfolds as we anticipate, Valon's market value could significantly benefit our profits moving forward. For instance, if its valuation reaches $10 billion, our equity stake could add a couple of dollars per share. I view this based on our equity ownership. We are also working on improving efficiency and branding, but we’re not rushing to grow origination just to compete with others. This has been evident in the wholesale market among various mortgage lenders. To conclude, as we head into Q&A, our investment portfolio showcases the strength of our franchise; we boast a robust origination business. I believe we will continue to expand into areas where we currently lack presence, which will enhance both our balance sheet and earnings. Moreover, this growth will also benefit our asset-backed financing, which is currently a highly sought-after area for limited partners looking for diversification from certain credit products. With our experience, we’re well-equipped to achieve strong returns backed by sustainable cash flow and often tangible assets. We've completed $4 billion in securitizations and invested $9 billion in various residential assets, largely through our own origination efforts. We've also sourced $1 billion in home improvement loans through our upgrade transaction, and we will keep expanding our third-party business and sourcing capabilities. Overall, the company is in excellent condition. As I mention in every earnings call, our valuation is quite low compared to our operations and offerings to limited partners and shareholders. Our priority remains on generating profits for them before pursuing anything else, which will support our growth. Eventually, the company will be revalued, and we are eager to continue growing our business. Now, I will turn it back to the operator for Q&A.

Operator, Operator

Our first question today comes from Crispin Love from Piper Sandler.

Crispin Love, Analyst from Piper Sandler

First, just looking at your funded volumes, purchase versus refinance, refinance made up over 40% for you in the quarter. I think that's the highest level for several years, at least on a percentage basis. Can you just detail that a bit? Were those competitive takeaways, a recapture on your own book? A little color there would be great. And then just expectations into the first quarter, thoughts on overall volumes relative to Q4, just given recent mortgage rate moves.

Baron Silverstein, President of NewRez

Yes. So look, we're a large correspondent buyer. So what you're seeing is a reflection of the market. You saw the rally in late summer and in September, and that you saw the refi volume pick up, and you see that in speeds overall going into the fourth quarter. And that's really kind of the measurement for what you've seen for refis going up. And then just going into January, Michael referred to what we call the Trump bump. So you saw kind of spreads tighten and then you saw the pickup in production coming into the month of January. And I think you'll see that when our numbers come out at the end of the first quarter.

Michael Nierenberg, CEO

What are your thoughts on the production for Q4, specifically regarding '26?

Baron Silverstein, President of NewRez

Our forecast for '26 is going to be up. We think we're going to be up around where the market is estimating, which I think is approximately 10%. I do think, Crispin, our internal view is that as we continue to connect with our homeowners, as we continue to deliver better and faster service for them and better tools, that we will continue to improve and pick up market share.

Michael Nierenberg, CEO

And Crispin, part of this relates to the investments we're making in marketing. We're discussing AI and bringing in new talent to lead certain divisions. I believe all of this will assist with recapturing business. We built Mr. Cooper during our time at Fortress, so we understand what refi recapture numbers should look like. There is certainly a science to this, but it requires expertise. I think we excel at it because of our extensive experience. That said, if you enter any cycle believing you're the best, you risk losing, and we don't always assume we're the best. We will invest both resources and capital to ensure our refi and recapture numbers continue to improve, but ultimately the market will dictate the outcome.

Crispin Love, Analyst from Piper Sandler

Great. I appreciate all that. And then, Michael, you alluded to it, but can you discuss competition in the mortgage space? Definitely, it's been a popular topic just from some competitors' results in the last few days. Gain on sale margins have been lower from a lot of others out there, but yours held well, actually expanded. Just what’s your view there? Are you seeing mortgage players being irrational in the fourth quarter and today?

Michael Nierenberg, CEO

Are you really asking me to comment on whether mortgage players are being irrational? I'm not sure that anyone is being irrational. What I can say is that it's a competitive industry; it always has been. We will see more origination, and some players are being more aggressive, but that doesn't guarantee they'll be more profitable. Regarding our company, as mentioned, we had a successful $400 million quarter in Q4, and in the MSR business, we adopted a more conservative strategy, which sets us apart. While we see competitors focused solely on growing origination, that won't be our approach. We aim to retain all our customers on our platform, particularly through refinancing and recapture. Additionally, the government has made some changes, which is why there was a slight increase in delinquencies in the fourth quarter. We believe that much of that, if not all, will reverse in the first quarter with the 10-year note at about 430 and a low 6 mortgage rate. We anticipate seeing that mark-to-market trend improve in the first quarter. In the broader mortgage business, there are some who have experienced real competition in origination for many years, but that hasn't been our experience and it won't be going forward. We have various strategies at our disposal to benefit our shareholders and stakeholders, and we'll continue to pursue those without engaging in a race to the bottom.

Operator, Operator

Our next question comes from Bose George from KBW.

Bose George, Analyst from KBW

Just wanted to follow up on the gain on sale margin. On the retail channel specifically, there was a pretty good increase this quarter. Last quarter, you guys noted that I think it was Ginnie's streamlined refis were driving some of the decrease that you saw in 3Q. So just quarter-over-quarter, fourth quarter over third quarter, just curious how much of the improvement was mix versus kind of an apples-to-apples improvement by product type?

Baron Silverstein, President of NewRez

Yes. So it's definitely mix is always a driver, right? You saw our correspondent share, which was hovering around 70%, is now, I think, 62% for the quarter as we picked up our production overall in our consumer direct channels. And then I would tell you, look, we felt like we were able to maintain our margins overall. But then you also have what I would just say is from a timing perspective: some of the timing of completion accrual, but also how we basically book our MSR recapture is driving what you see as a little bit of that increase in our margins on the consumer direct channel.

Bose George, Analyst from KBW

Okay. Great. And then actually, on the wholesale side, you guys alluded to the competition in that market. But then when I look at your numbers, volumes are up by a third, and your wholesale margin is up pretty meaningfully. So, yes, can you just kind of tie the two? I guess, it did not impact your performance?

Baron Silverstein, President of NewRez

Yes. So look, it's driving to our mix. Michael talks very much about us not chasing market share. So if we don't like where pricing is on, say, conventional or government product. But our focus is on non-agency, and we continue to grow on our non-agency and driving our non-agency production through wholesale. It's a really important channel to us. We're looking to basically try to expand as much as we can, but stay focused on and be disciplined on our margins.

Michael Nierenberg, CEO

Yes. Just one further comment on that, Bose. When you look at the non-agency space, and I brought up the so-called ABS space in the fundraising side or on the LP side, the ABF space, asset-based finance space is the hottest thing that any asset manager is going out to talk about. Our ability to differentiate ourselves where we could originate these loans and service these loans gives us a real edge over a lot of competition. So you're going to continue to see, I think, the non-agency space grow. We just got to make sure that not just on us, quite frankly, but as an industry, we maintain discipline around credit here.

Operator, Operator

Our next question comes from Doug Harter from UBS.

Douglas Harter, Analyst from UBS

Can you talk about the technical difficulty?

Baron Silverstein, President of NewRez

Operator?

Michael Nierenberg, CEO

Operator.

Operator, Operator

Are you able to hear me, sir?

Michael Nierenberg, CEO

Yes, I think we lost our queue.

Operator, Operator

Yes, sir. We're getting people back in now. While we're waiting for Doug to rejoin, I can join in Eric Hagen from BTIG.

Eric Hagen, Analyst from BTIG

So if the expectation is that you could remain in this REIT structure for the foreseeable future, but obviously, the clear focus is on growing your asset management at the same time. How do you think that affects your capital allocation plans? And if it ever looked like you could shed your REIT status, would that maybe catalyze a change in capital allocation in any way across the segments that you guys manage?

Michael Nierenberg, CEO

That's a great question and one we get frequently. We're very focused on our capital structure. At some point, we will need to become a C-Corp and continue to grow our asset management business. However, this won't detract from our objective of driving higher earnings for our shareholders and improving results for our limited partners. Our fee-related earnings continue to grow as an organization, but we're committed to prioritizing performance. Eventually, there might be opportunities to expand our fee-related earnings, which could enable us to establish a separately listed asset management business. We're also considering the idea of having a separate mortgage company for simplicity. Additionally, we manage Rithm Property Trust and are exploring capital formation opportunities as we expand in the commercial real estate sector. There are many dynamic elements at play. It's essential for analysts to know that our primary focus is on performance, which includes earnings for our shareholders and limited partners. Currently, our company has approximately $8.5 billion in permanent capital and generates over $1 billion in pretax earnings, trading at about 6 times earnings. Real asset management businesses typically trade between 10 to 30 times earnings. While some asset management firms with heavier balance sheets may trade lower, we see significant growth potential. The corporate structure and our current position as a REIT may evolve over time, but that doesn't mean we won't maintain a REIT. Looking at Blackstone, they have BXMT while also being a C-Corp. I mention this every earnings call, and I expect we will move in that direction at some point. We may not be exactly like Blackstone, but the corporate structure has its advantages.

Eric Hagen, Analyst from BTIG

Yes. Great. Great stuff. Do you guys think there are combination opportunities for Genesis to essentially apply the same playbook that you just did for Paramount, where you have this synergistic platform that you can raise capital around to support the acquisition? I mean maybe a better question is like within the various strategies that you guys do manage, where do you think you can apply that playbook where you raise capital for the asset manager, which gives you scale that you can plug into with another business that you also manage at the same time?

Michael Nierenberg, CEO

That's a great question. We're planning to originate more multifamily loans into Rithm Property Trust, which will help its capital base grow. From an equity perspective, Rithm Property Trust is an externally managed entity where Rithm owns 1.5 and over 20 over 8, I believe. We will be raising capital to support this growth. The balance sheet will expand through Genesis origination as well as third-party origins. It's essentially a permanent capital vehicle. We've done something similar with New Residential in the past, starting with $1 billion in capital, which has now grown to $8.5 billion. Blackstone started BXMT with a small amount and executed a couple of transformational deals to drive growth. We plan to do the same with RPT, supported by Genesis.

Operator, Operator

And our next question once again is from Doug Harter from UBS.

Douglas Harter, Analyst from UBS

Hopefully, this works better this time.

Michael Nierenberg, CEO

It does.

Douglas Harter, Analyst from UBS

Good. Could you provide us an update on the capital raising for Paramount and how we should consider the scale and structure of that?

Michael Nierenberg, CEO

It's a bit uncertain at the moment. We completed the Paramount acquisition at the end of December. We're considering whether to raise additional funds, as we initially financed through a third-party balance sheet. In this quarter, we conducted a preferred offering at the Rithm level, raising $250 million in permanent capital from the preferred market. We are not in a hurry to announce a new fund or to bring in joint venture partners. In commercial real estate, it's common for many to partner up, so we are looking into both options. We are actively thinking about the best funding structure. As I mentioned when we announced this acquisition, we aim to strengthen our relationships and partnerships with limited partners in the commercial real estate sector. This remains our main goal. I anticipate we will engage in a mix of fundraises, permanent capital raises, and joint venture partnerships. So, the situation remains fluid.

Douglas Harter, Analyst from UBS

Great. Can you provide some insight into the timing? How should we consider the balance between freeing up capital for redeployment and ensuring we have the right structure in place?

Michael Nierenberg, CEO

We finished the quarter with $1.7 billion in cash and liquidity, so we are not overly concerned about capital at this time. While we are a dividend-paying company and regularly invest in opportunities, our focus is on where our teams currently stand. I also want to highlight that we've made a couple of important hires in our asset management business to support its growth, with a press release to follow in the next week. One new hire is a former partner of mine from Fortress, who will lead the asset management business alongside our other partners at various organizations. We've also brought in someone highly recommended, who retired from Blackstone, to assist with our capital formation efforts. These significant hires on the asset management side will contribute to our ongoing growth. However, our primary focus remains on delivering performance for our limited partners, as achieving this will enable us to grow significantly.

Operator, Operator

Our next question comes from Giuliano Bologna from Compass Point.

Giuliano Anderes-Bologna, Analyst from Compass Point

Congratulations on your continued success. Considering the insights you've shared regarding the asset management area and the C-Corp, it's clear that your asset management business has expanded significantly. You've successfully integrated several acquisitions over the past few years. Are you aiming for a specific scale, as you're approaching becoming a large player in the alternative asset management segment? Additionally, do you have a profitability goal or a rough benchmark in mind before transitioning into a C-Corp?

Michael Nierenberg, CEO

I believe there isn't a specific amount we are targeting. It really depends on market expectations. When we consider scale, it's evident that when we engage with limited partners, they prefer to work with fewer institutions but desire a broader range of products. Currently, in our credit business, along with Sculptor, Crestline, and Rithm, we offer all the necessary products across credit, mortgage, asset-backed financing, and commercial real estate. The focus here is really on making sure these organizations are substantial enough in terms of frequency and value so they are not only trading on an appointment basis. I want to emphasize that we will never aim to be like Blackstone; we want to maintain our unique identity. Our goal is to grow carefully while being valued in the same league as top firms. We are exploring how to achieve a different valuation than what we currently have. While I expect that over the coming year we will reach our desired scale, I can't predict what that size will be.

Giuliano Anderes-Bologna, Analyst from Compass Point

That's helpful. And then maybe going over to the mortgage side. When I think about gains on sale, I'm assuming there's probably some positive lift from some of the recapture in the consumer direct channel. Just thinking about the amount of leverage that you have on that side, especially as recapture should continue, at least in the near term, do you think that should continue to be a driver of stability for your gain on sale margins on a consolidated basis?

Baron Silverstein, President of NewRez

Yes, absolutely. Michael talked about us continuing to drive our brand, connecting with our customers. We have 4 million customers on our platform, and making sure that we stay connected as best we can are going to continue to be a key driver for our business, our growth strategy and our platform overall.

Operator, Operator

And ladies and gentlemen, we have an additional question from Bose George from KBW.

Bose George, Analyst from KBW

In terms of recapture expectations in the market, I mean, do you think recapture expectations embedded in some of these servicing transfers that have happened or even in the correspondent channel are potentially a bit high?

Michael Nierenberg, CEO

I can't speak to the expectations of others, but reflecting on my experience building what is now known as Mr. Cooper with Jay and his team, we understand recapture percentages well. The industry has become more efficient, and with advancements in technology, it will likely continue to improve. Our partnerships, such as with Valon, and initiatives like HomeVision will contribute to this efficiency. While the mortgage sector is competitive and some players may act irrationally, that is not our approach. We aim to retain our customers. I can't assess whether others' assumptions are too optimistic, so I recommend discussing that with them directly. Okay. Well, I want to thank everybody for dialing in today. We appreciate your support. I was going through my notes last night, and I looked at the amount of times I was using the word great or terrific or wonderful, and I was looking for more adjectives. And the one thing you'll get from us is we're not going to show up in a meeting or tell you that we're the best in anything that we do because if we take that approach, we're not going to be the best. But we always have things to learn while saying that we have a very, very good company, and we care first about driving results. And with that, hopefully, we get a much better result on our equity price, and we'll continue to do the same thing we've been doing for our shareholders. So thanks again. I look forward to updating you throughout the quarter and on our next call. I appreciate everybody dialing in.

Operator, Operator

Ladies and gentlemen, we thank you for joining today's conference call and presentation. You may now disconnect your lines.